Mercer fund pays $26m tax in error

Sally Patten

Mercer Wealth Solutions is in the process of reimbursing $26 million to 40,000 superannuation fund members after it paid too much capital gains tax on savers’ behalf.

The super fund underpaid CGT on behalf of a further 10,000 members, whose accounts will be deducted accordingly.

During a periodic review conducted in early 2010, Mercer discovered it had made mistakes in its provisioning against CGT on certain investment options between January 2006 and December 2009.

The affected members – about one in five savers in the Mercer Super Trust – were mostly in diversified portfolios.

The super fund recouped the overpaid tax from the Australian Taxation Office and is using that money to reimburse members left out of pocket – without any recourse to the scheme’s risk reserves, David Anderson, Mercer’s managing director for Australia and New Zealand, said.

Mercer operates Australia’s biggest corporate super master trust, with 240,000 members and $15 billion of assets.

Mercer said it informed the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission as soon as the error was discovered.

“Provisioning for CGT is an involved process,” Mr Anderson said. “We’ve kept the regulator informed throughout this process.”

He said he was confident the error would not be repeated because the company had since revised its CGT provisioning policy.

“As part of our ongoing commitment,” Mercer said in a letter to members, “we have improved our processes for the Mercer Super Trust to reduce the likelihood of recurrence in the future.”

Mercer started sending letters to affected members in December last year and aims to have informed former members and the few remaining current savers shortly.

Mr Anderson said that less than 1 per cent of members affected had contacted the help line and no one had lodged a formal complaint.

The Australian Financial Review